Economy back on track

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Bikky Khosla | 02 Sep, 2014
The economy grew 5.7% in the April-June period, the highest in the last ten quarters. Nobody was expecting such level of growth. The GDP figures released by the Central Statistics Office last week also show expansion in industrial activities with fixed capital formation rising by 7.02% and a better investment scenario with private final consumer expenditure growing 5.6% during period. The industry grew 4.2% y-o-y against 0.4% while manufacturing expanded 3.5% y-o-y against 1.2% contraction in corresponding period last year. Overall, the first quarter GDP data visibly yields confidence.

Let's now have a look at foreign trade figures of the first three months of the current fiscal: our exports grew 5.26% in April to $25.6 billion, 12.4% in May to USD 28 billion, and 10.22% in June to $26.48 billion. Total value of exports for the quarter stands at $80.11 billion, up 9.31% from $73.28 billion recorded during the same period previous year. On the other hand, total imports in the first quarter stand at $116.4 billion, down 6.5% year-on-year. This contraction in trade deficit brings down current account deficit for the April-June period to 1.7% of GDP.

Meanwhile, the NDA government has completed 100 days in office now, and though the recent positive developments cannot said to be directly driven by policy measures, the fact that the new government is responsible for the comeback of a key economic ingredient -- business confidence -- which had been missing for a long period before it took charge on May 26, cannot be ignored. Now with the improved outlook, I think all eyes will be on Modi -- what will he do in the coming months to build on the recent developments and bring an end to the worst slowdown in the last decade.

Some of the measures taken during the last 100 days -- including the industry-friendly measures announced in the Budget, further opening up of railway, insurance and defence manufacturing for direct investment, and reforms related to environmental clearance, transport and finance -- are welcome developments. Some critics point out that little attention has been focused on big-bang reforms, but I hope the coming months would be different and we would see bolder and more positive measures for pushing tax and land reforms, foreign investment and overall business environment.

I invite your opinions.